Non-bankability

Inside the EIC Accelerator: Non-bankability

Non-bankability is probably the most important criteria today for the EIC Accelerator. Introduced as an evaluation criteria by the EIC in 2019, has become a determinant factor in winning the support from the EIC Accelerator programme.

In a nutshell: if the project is considered bankable by any of the evaluators in the evaluation proposal stage, your company will not be invited to the interview stage. If you are invited to the interview stage, but you do not show evidence that your company has pursued funding from a myriad of sources (VCs, angels, corporates, etc.), then you will not receive the funding.

This is quite tricky and can be a deadly trap. For all the rest of criteria, you must convince evaluators that your project is amazing, has a solid track record and will become a disruption. But for the non-bankability criteria, you must argue that, although this is a unique project, it is impossible to finance it through other channels.

I must say that this criteria has created a lot of controversy inside and outside the EIC. Our feeling is that most evaluators do not understand this requirement and evaluations show an extraordinary level of variability. As we collaborate with many other consultants, we know that this problem is widespread and the evaluation of the non-bankability is almost “random”. This is a problem well-known by the EIC and that they will try to solve through a new evaluation questionnaire in 2021.

I can give you an example I worked with last year: a University spin-off with no assets, no investors, developing a disruptive clean technology for industrial processes. After 3 years of development, they have a promising prototype but they are not able to raise funding as they need first to secure some pilot projects. The young founders do not have much money neither. They even secure a couple of letters from financing bodies and banks stating that the project is considered non-bankable. Oh surprise! They were considered “bankable” by the EIC evaluators and did not pass to the interview. Why? Honestly, we don’t know.

For all of you preparing a proposal for the EIC Accelerator or thinking about it, I can only give some hints:

  1. Be ambitious!  If you are considering applying, make first a thorough analysis of other possible funding sources. It’s possible to get EIC support, even if you have investors but you will have to prepare a “project” that, as such, is non-bankable. We have been successful with many startups and SMEs that were profitable or had previous investors. The application must be focused on the next development stage, which should require a level of funding that is neither available for the company nor easily can be raised from investors/banks.
  2. Identify the risks. Today’s EIC focus in on high-risk high-impact projects. The level of risk must be very high. This is bad news for solid business models built on top of software platforms (eg. SaaS) if they do not integrate a disruptive technology in its core developments. The EIC wants to finance companies that cannot get funding from investors and this leaves behind many companies in the software or SaaS industry as these industries show solid private funding. If you go for it, you must identify critical technical developments that are not yet on the market. You must advance the “state of the art” and this entails risks.
  3. Document it! You must document and gather evidence of your non/bankability.Letters and statements from banks, financing bodies and investors are useful. Be careful, because some evaluators may be wary of companies with many letters of support from investors. You can create the opposite effect. The perfect letter, from my point of view, is one that supports the company, and expresses the interest to finance but conditional to the EIC support.
  4. Be prepared for the interview! Once you havebeen selected for the interview phase, you have a very high chance of success. You must acknowledge that, although the type of questions you will get are very similar to the ones that a investor would make, the answers that the interview panel are expecting are slightly different.

We have the experience to prepare proposals with solid non-bankability justifications. We also have successfully coached several companies through the interview process. It’s a challenging evaluation but there are strategies to maximise the chance of success.

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